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Friday, December 28, 2012

It would stand to reason that a company's products that help extend the
shelf life of food and/or offer improvements in customer experiences
would do pretty well. And to a certain extent, that has been true for Bemis (NYSE:BMS).
At a minimum, Bemis has been an excellent dividend stock. The question
now, though, is whether investor expectations are running a little too
high for a company whose competitive advantages don't really translate
into clearly superior returns on capital or free cash flow (FCF).

The stock of Greif (NYSE:GEF),
a company that makes industrial packaging products like drums (steel,
fiber or plastic), rigid bulk containers and paper packaging, is one of
those that is pretty frustrating to investors, as you have to be willing
to buy (or sell) into considerable uncertainty. While 2013 looks like
it will be a challenging year for industrial companies, investors are
also likely to be on the lookout for signs of bottoming, and Greif could
do well on that trade.

It's hard to argue that Silgan (Nasdaq:SLGN) doesn't have a very attractive business with pretty significant barriers to entry.
Silgan has a better than 50% share in North American can markets, and
likewise substantial share in its closures business. What's more, other
competitors like Ball (NYSE:BLL), Crown Holdings (NYSE:CCK) and Berry Plastics (NYSE:BERY)
tend towards the rational when it comes to pricing. Couple that with a
strong emphasis on returning capital to shareholders (with dividends and
buybacks), and you have what looks like a strong company.

The
question with Silgan, though, is the extent to which it can adapt with
the times. As food producers have switched from glass to plastic, I
expect the same to happen over time with metal. While Silgan can offset
some of that with expansion into emerging markets, I have to ask whether
the company also needs to grow beyond metal cans to maintain its
long-term earnings power.

As a group, 2012 has been a middling year for the pharmaceutical sector. Against a roughly 13% year-to-date gain in the S&P 500, the S&P Pharmaceuticals ETF (ARCA:XPH)
is up only about 8%. Companies in the pharmaceutical space continue to
face heavy pressure to their revenue as key drugs have gone off-patent
and many companies have struggled to develop new blockbusters to pick
up the slack. Instead, many companies have focused on cost-cutting as a
means of improving results and investors seem to be relatively skeptical
about the near-term growth potential of the sector.

This year has turned out to be an odd one for the medical technology
industry. Although the overall performance of the sector has basically
matched the year-to-date performance of the S&P 500
(a low teens gain for the year), it has very much been a "stock
picker's market" with individual company stories standing out against a
backdrop of only modest volume growth and ongoing pricing pressure.

Despite 2012 being a year where investors were increasingly skittish as
the year wore on, the exceptionally risky biotechnology industry enjoyed
an exceptionally good year. While the group has come off a bit from its
peak in the early fall, the group is up more than 30% year to date -
making it not only a strong outperformer relative to the S&P 500 (which is up about 12%), but one of the best-performing groups of the year.

While disappointing clinical trial results are not only common, they're
what most investors should ultimately expect (only about 10 to 15% of
new drugs make it to market). Even so, last week saw three
highly-anticipated biotech events all go against long investors. While
the prospects for these three stories do vary quite a bit, at a minimum
they ought to serve as a reminder that there are no sure things in this
space.

Important note!Investopedia's editors mistakenly altered the final paragraph to a significant extent. The original read:

Perhaps there are
some CFS patients who could benefit from Ampligen. Unfortunately, I
believe that the poor quality of the the trials run by Hemispherx
(the resulting data) make it a moot point, and I believe this company
and stock will continue to serve as clear warnings regarding biotechs
that linger on for years at a time and cannot generate interest from
proven biotech institutional investors.

I have requested that the text be changed back to this correct/intended final paragraph.

Nike (NYSE:NKE)
gave investors a rare chance to pick up shares at a more reasonable
price twice this year, but it looks like it's back to business as usual
for the world's biggest footwear company. Although business in China
remains sluggish, Nike's overall growth and margin profile continue to
look quite strong.

Thursday, December 27, 2012

There were at least a couple reasons why this should not have been an
especially good year for banks in the United States. Low interest rates
have made it very difficult for banks to thrive on their core spread
businesses, and new banking regulations have certainly crimped their
ability to generate the same fee-based income as before. And yet,
lending has gradually improved and many banks have seen investors
increasingly become willing to assign more reasonable valuations to
their shares.

All in all, the regional banking industry has seen
better than an approximate 30% appreciation this year, well ahead of
the 13% gain in the S&P 500.

Friday, December 21, 2012

Net worth is no trivial matter, as it is ultimately the only meaningful measure of personal wealth. There are many good ways to build individual net worth,
including earning more, saving more and improving the return on savings
and investments, but it's equally important to play a good defense.
With that in mind, look to avoid these prime ways to destroy net worth.

For better or worse, Wall Street is a "who you know" sort of world where reputation and image go a long way. Although getting a job with a Wall Street firm
does not require a degree from a top-notch university, the fact remains
that many top banks recruit at a limited number of schools, and those
schools are often prominently placed on the ubiquitous "Best" lists. In
fact, in some cases, particular firms will hire only from a
narrow list of specific universities; if an outsider applies, their
resume will "be kept on file," but the odds of an interview are quite
low.

For a couple of quarters now, I've thought that Jabil Circuit (NYSE:JBL)
looked undervalued on a long-term basis, but that the trends in the
electronic manufacturing services (EMS) industry were likely to keep the
stock stuck. To that end, the shares are down about 1% for the year,
even though the company's business with Apple (Nasdaq:AAPL)
seems to be ramping up well. I continue to believe that Jabil's current
price understates its long-term value, but I also believe that getting
the timing right on when to buy this stock could be tricky given the
ongoing malaise across so much of consumer and tech hardware.

For most of the past decade, investors have been badly burned by
energy-tech and bio-whatever. In many cases, investors bought into bad
business models that were built more on hype than sound economic
principles. Yet, throughout that time, ethanol and biodiesel use has
continued to grow and the U.S. government has continued to encourage
(and in many cases, mandate) increased use of these fuels.

That leaves the very small FutureFuel (FF)
as an interesting, albeit very risky, stock to consider. Not only does
FutureFuel have a real biodiesel plant up and running, but it uses a
different feedstock than most if its competitors. FutureFuel also has a
specialty chemical business that not only offsets some of the volatility
of the biodiesel business, but also offers growth prospects in its own
right.

As investors have seen with General Mills (NYSE:GIS) a couple of days ago and now again with ConAgra (NYSE:CAG),
the packaged food industry is still facing pretty challenging
conditions. In particular, it looks as though companies can raise prices
if they want, but they see an almost immediate hit to volumes. At the
same time, give credit where it's due - ConAgra has continued to make
progress with its margins. With Ralcorp (NYSE:RAH)
now coming into the fold, the next year or two could be pretty
interesting for ConAgra, even as the retail environment remains
challenging.

Thursday, December 20, 2012

It's not often that a company buys its way into becoming three times bigger overnight, but that's basically what ARRIS (Nasdaq:ARRS) has done by becoming the winning bidder in Google's (Nasdaq:GOOG)
sale of the Motorola Home business. While it's a bold and
transformative deal for ARRIS, the ultimate value to Google is still to
be determined.

The Deal
It
was no great surprise that Google sold the Motorola Home business. When
Google bought Motorola, it did so for the company's patents and its
smartphone business (likely in that order). Motorola's set-top box and
cable TV equipment business was never of all that much interest to
Google, though it was valuable enough not to just be shut down.

Wall Street can be a surprisingly stubborn place, and many sell-side analysts continue to stubbornly defend FedEx (NYSE:FDX).
While the company's performance isn't all bad, and there's clearly
value in its large global asset base, it's still difficult to reconcile
sell-side affection for this name with likely free cash flow (FCF) growth over the coming decade.

Investors do well to hold on to a thorough skepticism when it comes to
small Chinese companies, but Hollysys Automation Technologies (HOLI)
looks like a name that aggressive investors should get to know better.
While it is a lofty goal indeed to say that Hollysys could become the
next ABB (ABB), Siemens (SI), Emerson (EMR), or Rockwell (ROK),
Hollysys has already shown that it can carve out a meaningful niche
against these large foreign competitors in China's fast-growing
automation market.

Software giant Oracle (Nasdaq:ORCL)
continues to show that size is not an insurmountable obstacle to
growth. Although the enterprise IT world continues to evolve (with
concepts like Big Data, cloud and so on getting ample airtime), Oracle
continues to show that it is willing to evolve with it. While this
company is quite large and very closely followed, I still believe
shareholders can look forward to meaningful gains to come.

There was absolutely no reason to think that the fiscal fourth quarter was going to be a good one for truck builder Navistar (NYSE:NAV),
and it certainly was not a good one. The real question for investors,
though, is whether this company can hit its new product launch targets,
streamline its manufacturing process and rebuild the share that
management missteps destroyed over the past couple of years. This
continues to look like a binary stock to me - if management can direct a
real turnaround, the shares will thrive from here, but survival (and success) are far from assured.

Wednesday, December 19, 2012

Protein production is a tough, low-margin business. Like most other
tough, low margin businesses, it's also difficult to build real economic moats and create long-term shareholder value. So while Sanderson Farms (Nasdaq:SAFM)
deserves credit for a decent quarter during challenging times,
investors would likely do well to regard this name as more of a trading
opportunity than a long-term core holding.

I haven't felt all that adamantly positive or negative about General Mills (NYSE:GIS)
for a while now. While the company has some definite positives in its
favor (a history of innovation and good international growth potential),
it is also struggling with weak volumes and share loss in key
categories. With the price close to fair value and an uncertain retail strategy in the United States, I'd still just as soon own other stocks in the consumer staples area.

In what has been a fairly good year for stocks, a few industries stand
out as laggards. Although technology has had a decent 2012, semiconductors
are a notable exception, as the industry is only up about 3 to 6% for
the year (depending upon the data provider). A number of factors have
played in this weak performance. One of the biggest culprits, though,
has been weak demand for computers and consumer electronics. Flagging or
stagnant demand for telecom equipment has also played a major role, as
have slowdowns in the automobile and industrial end-markets. Of course,
the semiconductor industry in not a uniform bloc, and there are many
stories worth further exploration.

If Bravo ever needs to recast "Millionaire Matchmaker," their producers ought to consider giving Carl Icahn a call, as it seems like Icahn likes nothing more than to try to land opportunistic M&A deals. In his latest attempt, Icahn is proposing (via his listed company Icahn Enterprises LP (Nasdaq:IEP)) that his majority-held American Railcar Industries (Nasdaq:ARII) acquire fellow railcar builder Greenbrier (NYSE:GBX).
As is so often the case with Icahn-proposed deals, though, the deal is
long on logic and short on value for the selling shareholders.

Tuesday, December 18, 2012

Investors' options for investing outside the United States have
steadily gotten better over the past decade, and it's no longer that
difficult to find online brokers who will handle trades for Canadian,
Japanese, or Western European markets. It's still not easy to invest in
Turkey, though, and that leaves investors with a rather limited menu of
options, including the iShares MSCI Turkey ETF (TUR) and Turkey's leading mobile network service provider, Turkcell (TKC).

I
am generally not in favor of substituting a company as a country
investment, even when an argument can be made that the country's
fortunes and the company's success are tied relatively closely together.
So setting aside the scarcity of Turkish investment options, is
Turkcell still a worthwhile holding for aggressive investors?

Like people, companies change as they grow older. America Movil (AMX)
was once a premier Latin American growth stock at a time when retail
investors had few good options for investing in that region. Since then,
both the company and its markets have matured, and investors now have
numerous other options for investing in emerging markets. Given the
company's maturing model and its ventures into Europe, is America Movil
still a growth stock and is it still worth owning?

It can be dangerous to have a good feeling about a company's stock, but
not be able to back it up with strong quantitative data. And yet, that
broadly describes most turnaround
situations, as the timing and magnitude of earnings and cash flow
recoveries are so hard to model accurately. With that in mind, I think Finisar (Nasdaq:FNSR) could be in for better days as upgrade cycles in the data center and telecom markets take revenue and earnings higher.

There's always a difference in the markets between "de facto" ("in
practice") and "de jure" ("in law"), and recent announcements regarding
international reserve currencies would seem to reflect that difference. Word came out in mid-November that the IMF
is likely to reclassify the Australian dollar and Canadian dollar as
"official" reserve currencies. While this is indeed a significant
development, it seems more a reflection of reality than a major
prospective change.

Question: Who will be the biggest gainers and losers in the tech sector for 2013?

Losers
Even if some of the gains have evaporated in
the second half of the year, 2012 has still been a pretty solid year for
tech stocks. On Wall Street, though, no good deeds go unpunished for
long, and there will certainly be some losers in 2013. While crystal
balls are still in short supply, these are some stories that investors
might want to approach with some caution in 2013.

WinTel (Microsoft (Nasdaq:MSFT) / Intel (Nasdaq:INTC)
Although
I don't necessarily believe that Microsoft and Intel are going to rack
up big losses for 2013 (and the stocks have underperformed in 2012), I
do believe 2013 may mark the Waterloo for those who believe that the
WinTel PC concept still has legs. The ultrabook concept has yet to catch
on and Win8 could be setting up for a disappointment. While I think Lenovo (Nasdaq:LNVGY)
still has room to grow its PC business (and that neither the desktop or
notebook computer are going away), I think 2013 will confirm that
whatever future growth Microsoft and Intel may have, it's not in the PC
business anymore.

Monday, December 17, 2012

It's not all that often that the Street seems to agree on something, but
there is widespread agreement among analysts and investors that Freeport McMoRan's (NYSE:FCX) bids for Plains Exploration (NYSE:PXP) and McMoRan Exploration (NYSE:MMR)
are both bad ideas. Assuming they go through, then, Freeport McMoRan
may find its luster as a copper play dulled. Lucky for investors, then, a
new option may be on the rise.

When word came out last week that Sprint (NYSE:S) had approached Clearwire (Nasdaq:CLWR)
with a $2.90 per share cash bid, the common reaction was that Sprint
would have to do better. Well, Sprint has done better, and the Clearwire
board has unanimously agreed, but I suspect that an extra 7 cents per
share is not going to thrill Clearwire's investors.

It looks like the energy services sector isn't going to deliver any sort
of Christmas miracle this year. While I don't believe investors were
expecting especially strong results for the calendar fourth quarter,
early guidance is suggested that this is going to be a disappointing end to what has been a pretty dismal year.

Rigs Keep Easing
The data from Baker Hughes (NYSE:BHI)
on global rig counts for November was not especially strong. The United
States rig count fell more than 1% from October and the November 2012
count was about 10% lower than the 2011 figure, as producers continue to
cut back in the face in the face of low natural gas prices.

With Adobe (Nasdaq:ADBE)
is still in the midst of a significant change in its business model
(towards a subscription-based model), it is likely that it is still
going to take a few more quarters for investors to really dial in their
expectations. Nevertheless, it does look as though this switch holds the
potential of rejuvenating a model that some thought was bereft of
growth. Adobe's valuation isn't as compelling as it was just a quarter
ago, but this remains a quality company trading at a discount.

Friday, December 14, 2012

Given large ongoing losses and sizable funding needs, most investors have considered it a given that Clearwire (Nasdaq:CLWR) will be acquired. With its approximate 50.5% ownership stake, meaningful high-end spectrum needs and a recent influx of capital from Japan's Softbank, Sprint (NYSE:S)
was seen as the most likely candidate. Now it seems like Sprint is
finally making its move, but the market reaction and relative valuation
suggest Sprint may have some work left to do.

Something is going on with VeriFone (NYSE:PAY),
and it's not good. Not only is the stock well off its highs, but
whatever momentum that the company had gained since its fiscal third
quarter miss is likely to evaporate with another miss. Although I don't
think VeriFone is a fundamentally flawed business, it may well be
transitioning away from that phase of its corporate life where investors
look past almost any bad news in the pursuit of growth.

For readers who think that the United States government bends over backwards to accommodate the financial industry, MetLife's (NYSE:MET) discussion of guidance for the remainder of 2012 and 2013 is a must-read. While the troubled asset relief program
and a variety of other government programs clearly allowed financial
companies to shore up their capital, the reality is that the zero
interest rate policy and "QE infinity" are taking a toll on companies
that earn their living on interest rate spreads.

While it's hardly news that investors have sold all manner of heavy industrial OEMs as 2012 has progressed, and Joy Global (NYSE:JOY) has been hit a litter harder than most. Without the offsetting construction or agriculture businesses of Caterpillar (NYSE:CAT) or Deere (NYSE:DE), or the industrial compressor business of Atlas Copco (OTC:ATLKY),
Joy Global shares have had a tough year. Although this large mining
concern ended its fiscal year on a relatively positive note and
valuation is not particularly demanding, these shares figure to be more volatile than average as investors guess about the timing of the eventual coal recovery.

Optical networking company Ciena (Nasdaq:CIEN) reported sales below expectations and lowered its guidance
for the fiscal first quarter ... so of course the stock is up about 2%
(as of this writing) after the announcement. That's just part of the
weirdness that surrounds providers of carrier equipment these days -
while 2012 was a pretty rough year, analysts and investors expect big
carriers like AT&T (NYSE:T) and Verizon (NYSE:VZ)
to start spending again soon. Although Ciena is difficult to value
today because of the uncertainty of the pace of the spending recovery, I
still believe this is an interesting stock for aggressive investors
thinking a few moves ahead.

It may sound contradictory, but Wall Street is often both predictive and
reactive. To that end, the stock of carbon fiber specialist Hexcel (NYSE:HXL)
has done pretty well since 2009 on the basis of investor expectations
for more composite material content in commercial aerospace. At the same
time, though, it's well worth remembering that Hexcel has struggled to
deliver consistent, impressive margins and returns on capital. If Hexcel
can't find a way to establish better peak earnings and cash flow potential, it may be difficult for these shares to outperform.

It's a beautiful thing when a company makes the transition from turnaround to good operator, and home furnishings retailer Pier 1 (NYSE:PIR)
seems to be doing exactly that. Comp growth continues to impress,
margins are looking good and the company has several initiatives
underway that should drive higher sales and/or margins. I wouldn't be in
any hurry to leave this party were I already in the room, but new
investors might want to consider the valuation today before diving in
with their own money.

Thursday, December 13, 2012

Investors in Rigel Pharmaceuticals (RIGL)
got another very much unwanted dose of bad (or at least confusing) data
on Thursday, with disappointing OSKIRA-4 Phase 2 data on fostamatinib.
While there are additional studies still under way and scenarios under
which this drug could still make it, Rigel Pharmaceuticals is well on
its way to being one of my worst biotech calls, and the risk on this
stock is definitely running high.

Bear's Response
When considering the question of the upcoming "fiscal cliff"
(the expiration of various tax cuts and the simultaneous automatic cuts
across a variety of federal budget items), I'm reminded of a famous
quote from Winston Churchill, "Americans can always be counted on to do
the right thing ... after they have exhausted all other possibilities."
While I do believe Congress will have little choice but to find a
compromise that undoes the growth-damaging combination of higher taxes
and lower spending, it will not come until 2013.

As
one of the strongest retailers in the United States (not to mentioned
one of the best-liked), Costco
(Nasdaq:COST)
already has a lot going for it. Not only is Costco already an
exceptionally efficient retailer in terms of generating sales per
square foot, the company still has ample organic expansion potential
in the U.S. and abroad. The down-side to this story is not too
surprising - Costco's success and popularity are well-known among
investors, and the stock doesn't offer a compelling bargain relative
to expected above-average growth rates.

Wall Street hates uncertainty, but rare earth miner Molycorp (NYSE:MCP)
is providing exactly that right now, and along multiple lines. There
were already sufficient worries in the market about the future of rare
earth oxide (REO) prices and whether years of elevated prices had
permanently destroyed demand, and the announcement of an investigation
by the Securities And Exchange Commission (SEC) didn't help. Now the company has to deal with the unexpected resignation of its CEO at a time when it also likely needs to arrange additional financing.

Rumors have been swirling for a while about whether industrial compressor, blower and pumpmaker Gardner Denver (NYSE:GDI) would, in fact, reach a deal to sell itself and whether SPX (NYSE:SPW)
would make an aggressive play for this company. With rumors now heating
up that the two companies are in exclusive talks, it's very much worth
asking whether this is really a good deal for SPX or Gardner Denver
shareholders.

I have to be honest right off the bat - I didn't think Philips (NYSE:PHG) had what it would take to really get the business turnaround they needed. Yet, here we are with this European conglomerate reporting steady mid-single digit organic growth
and improving margins. While I definitely missed the potential for
Philips' self-improvement in 2012 (and the stock performance that has
doubled the S&P 500), I still have some long-term fundamental questions about where Philips stands against the competition and whether sell-side analysts (and investors) are expecting too much from this company.

Turnarounds can be great investments, but you generally have to buy in
at a point where the Street is still questioning the survivability of
the company and pushing for dramatic, sweeping changes. In the case of Procter & Gamble (NYSE:PG),
the pressure is still very much on management to deliver better
results, but the shares don't reflect all that much uncertainty or
pessimism about the company's prospects. On the contrary, it looks like
the Street already pretty much expects this story to have a relatively
happy ending.

More and more it's looking like 2013 is going to be a challenging year
for a variety of businesses. While it's convenient (and not entirely
inaccurate) to lay some of this at the feet of the "fiscal cliff,"
it also looks like the strong industrial rally in North America is
petering out, while Europe and China aren't looking strong enough to
take up the slack. With all of that in mind, Honeywell's (NYSE:HON) guidance
update was not all that surprising. Though this remains a generally
underrated conglomerate, the shares don't look like a tremendous bargain
today.

Wednesday, December 12, 2012

To at least some extent, this has been one of those "if it can go wrong, it will" years for South Africa's MTN Group (MTNOY.PK).
And yet, despite setbacks in Nigeria, Iran, and Syria, MTN Group
continues to post solid revenue growth, expanding margins, and excellent
returns on capital, while generating more cash than it needs to run the
business. While political risk is always going to shadow MTN Group,
this looks like an undervalued play on one of the best remaining growth
stories in mobile services.

Rumors
are now in flight that large private equity group Warburg Pincus is
ready to sell its large eye care business Bausch & Lomb. While
recent reports suggest that Warburg would prefer an outright sale at
this point, it sounds like an IPO could be in the works as a back-up
plan. But the larger question for investors is whether there are any
motivated bidders out there likely to meet Warburg's price target.

Nothing about YM BioSciences (YMI)
was ever easy or entirely normal, so I suppose it's no great surprise
that this company's final story is a more than a little bit out of the
norm. Although it was not surprising to see that YM BioSciences got a
buyout bid, the fact that it is Gilead Sciences (GILD) stepping up for the deal certainly surprises me.

The Deal To Be
Assuming
that the deal goes through as announced, Gilead will be acquiring YM
BioSciences for $2.95 per share in case. That's a bill of about $510
million for Gilead, though YMI's cash on hand of about $125 million
offsets the net price by a meaningful amount. As a development-stage
biotech, YMI has no revenue or profits, though I would think Gilead
should be able to make use of at least some of YMI's accumulated tax
losses.

December is the season for rumors in the financial markets, as there's
relatively little actual news for reporters and columnists to discuss.
With that in mind, a weekend piece in Britain's Sunday Telegraph regarding a potential merger between Diageo (NYSE:DEO) and Beam (Nasdaq:BEAM) should be taken with more than a few grains of salt.

In many respects, November's rail carload data (as reported by the Association of American Railroads (AAR) in its monthly Rail Time Indicators
report) is more of the same, only more so. United States railroads
continue to see an ongoing erosion of coal business, but underlying
industrial demand continues to be relatively positive. Although a host
of U.S. industrial companies continue to express caution about demand
for the first half of 2013, carload traffic suggests that there may not
be as much downside risk as feared.

With the bankruptcy auction of defunct battery developer A123's (OTC:AONEQ)
commercial assets now complete, the story is over and common
shareholders will walk away with a total loss. Not only does the A123
story serve as a bitter reminder of the sizable hurdles that new
energy-tech companies must face, but also the dangers of buying into the
hype at the cost of scientific and economic realities.

To say that Alcatel-Lucent (NYSE:ALU)
is in serious trouble is to say that water is wet, as these shares have
seen a bumpy ride down from the tech bubble peaks in 2000. Despite a
lucrative patent estate and solid technology, the company has struggled to translate its intellectual property into successful products and has largely failed to compete effectively with other telco equipment rivals like Cisco (Nasdaq:CSCO), Juniper (Nasdaq:JNPR), Huawei and ZTE (OTC:ZTCOY).
Now with rumors flying that the company is considering using its patent
portfolio to secure financing, it's worth asking if Alcatel-Lucent is
down to its final cards to play in its ongoing effort to turn around.

Tuesday, December 11, 2012

This has been a good year to own companies in the adult beverage trade, as stocks like Anheuser-Busch InBev (BUD), Diageo (DEO), Pernod-Ricard (PDRDY.PK), and Heineken (HINKY.PK) have all outperformed the S&P 500 by a significant margin. The world's second-largest brewer, SABMiller (SBMRY.PK)
belongs on that list of outperformers as well, as investors have bid up
the shares on improving volume growth and margins. Looking out into
2013, though, the question is whether SABMiller is still poised to be an
outperformer.

The biotech scrap heap isn't always the most promising place to go shopping, but biotech giant Amgen (AMGN)
is going to give it a try, announcing on Monday that it will acquire
Iceland's deCODE Genetics for $415 million in cash. That's a pretty
stunning reversal for a company that sold for $14 million not so long
ago, and it remains to be seen whether Amgen can find the key to unlock
the value that many have seen in deCODE's approach for more than a
decade.

It's a fact of the investing life that when you swing for the fences,
you will occasionally strike out. Thus far, owning shares of "bioflavor"
developer Senomyx (SNMX)
has been a frustrating and losing experience for most investors. While
there is still considerable potential in this very under-followed stock,
investors have to accept a biotech-like risk that Senomyx will
ultimately be a bitter experience and a total washout as a stock.

Monday, December 10, 2012

Debt is an evergreen topic in financial writing, whether it involves the
perks and perils of individual consumer debt, corporate debt or
national debt. While the national debt of the United States has never
really ever slipped out of the national dialogue, events over the past
decade have intensified the discussion.

Tax cuts, spending on multiple wars and a major recession induced by the collapse of the housing market have combined to spike the U.S. debt burden, while sovereign debt
issues have all but blown up the economies of Southern Europe (not to
mention the banks, insurance companies and other investors who bought
that debt). What's more, debt has started to increasingly factor into
bilateral and multilateral political squabbles. While debt is
fundamentally necessary to the operation of a national government, it is
increasingly clear that debt can be limiting and dangerous.

The markets have seen plenty of stories like Titan Machinery (Nasdaq:TITN)
- stories where a company uses debt to consolidate a highly-fragmented,
low-margin industry where the hope is that scale can ultimately improve
those margins. Many of these stories hit the rocks when
acquisition-fueled growth peters out and/or operational missteps make
the debt load unmanageable. There's no guarantee that Titan Machinery
will meet this same fate, but investors would do well to realize the
risks that come with the apparent undervaluation here.

Analyst days are supposed to be a chance for management to give analysts
a solid run-down on the company's priorities and strategic direction.
When done right, they also tend to have analysts and investors walking
out the door feeling a little better about the company. Broadcom's (Nasdaq:BRCM)
analyst day pretty much checked all of the boxes that it needed to, and
this remains a chip stock well worth consideration from most investors.

As I've written a few times before, when it comes to protein producers such as Tyson (NYSE:TSN), Smithfield (NYSE:SFD) and Pilgrim's Pride (NYSE:PPC),
above-average year-to-year and quarter-to-quarter volatility is just
the way these businesses are. While Smithfield delivered a surprisingly
good fiscal second quarter, investors considering these shares need to
realize that this is a tough industry in which to try to earn long-term
economic returns.

It's not uncommon at all for tech IPOs to selloff, sometimes sharply, once the hoopla of the IPO fades - Facebook (Nasdaq:FB) being perhaps the best recent example. While Palo Alto Networks (NYSE:PANW)
debuted to much fanfare, the shares have been carving out new 52-week
lows on worries about the macro IT environment and fading stock
momentum. Palo Alto is still a long distance from value, but these
shares are a lot more interesting today than just one quarter ago.

Sunday, December 9, 2012

Oil makes the world go ’round, and finding more oil is one of the
principal goals of multinational energy giants like Exxon Mobil (XOM), British Petroleum (BP) and Chevron (CVX).
Unfortunately, it has become harder and harder to find fields that
really move the needle for corporate or national reserve totals.
Nevertheless, just because it is difficult does not mean it is
impossible, and investors can look back to some notable successes in the
history of the oil industry.

Iran is quite possibly one of the best-known and least-known countries
in the world for American investors. Tense, if not outright hostile,
relations between Iran and many Western countries have kept it in the
news, but relatively few investors seem to appreciate Iran’s size,
demographics (it’s a very young country), and economic prospects. In
recent years sanctions have had a massive impact on Iran’s economy, but
it remains a major player within OPEC and in the global energy market.

One of the wealthiest countries in the world, and the richest in Asia in
GDP per capita terms, Australia is an unusual mix of a modern market
economy with a large commodities-driven export infrastructure. Despite
the influx of wealth created by its natural resources, Australia has
never been particularly successful in developing a large manufacturing
base. What’s more, the country has run large and persistent current
account deficits for over a half-century. Nevertheless, Australia has
very significant and efficient mining and agricultural sectors, and ranks highly in the world in many categories.

Although the geographical size of China is perhaps not that difficult
for North Americans to appreciate, their population is another matter.
As China has become the second-largest economy in the world, it is
without question transformed into an enormous force in the world’s commodity markets;
so much so, in fact, that the recent commodity supercycle is now
generally seen as a byproduct of China’s emergence.

South Africa is the largest economy of Africa, and it accounts for
almost one-quarter of the continent’s GDP. The path to this status has
not been an easy one, however, as the country languished under sanctions
in the 1980s tied to the government’s apartheid policies. While South
Africa has a relatively well-developed manufacturing sector by the
standards of African economies (and developing economies in general), a
meaningful percentage of the country’s economy still revolves around commodities.

Friday, December 7, 2012

One of the biggest decisions in the life of any biotech is whether to
keep a promising compound in-house and market it directly, or whether to
partner with a larger pharmaceutical company and collect royalties.
While there have been a number of notable go-it-alone success stories
(including names like Alexion Pharmaceuticals (ALXN), Gilead (GILD), and Amgen (AMGN)),
there have also been multiple of examples of companies that essentially
shortchanged themselves by marketing a compound on their own.

Multi-Color (LABL)
is the sort of obscure small-cap company that I love; the company's
products are ubiquitous and essential (product labels), but nobody
really ever thinks about them. What's more, Multi-Color is a good play
not only on the overall volume growth of consumer goods, but also on the
increasing sophistication of labels and the very fragmented nature of
the industry. While Multi-Color is not a very liquid or well-covered
stock, I believe patient investors will be impressed with what this
company becomes over the next three, five, or 10 years.

Question: Is early payment of dividends an effective way of avoiding the tax due to the fiscal cliff?

Bull's Response
There's really only one fundamental reason for publicly-traded companies to exist - to pool capital
from shareholders, invest it in projects that generate positive net
economic returns on that capital and return the capital to shareholders.
Whatever legal moves a company can take to maximize the value of the
capital they return to shareholders is, on balance, a good thing.

So too with the recent spate of special dividends and accelerate dividend payment schedules in light of the potential tax ramifications of the fiscal cliff.

"Pay for performance" has long been a mantra on Wall Street, and it's a little harder to condemn athletic apparel maker lululemon athletica (Nasdaq:LULU)
for its valuation when it continues to perform as well as it does. Not
only does the company continue to move truly impressive quantities of
premium-priced merchandise, but the company's cautious inventory and
expansion philosophies mitigate some of the normal retailing risks. All
of that said, investors aren't getting any bargains in these shares.

Wall Street is always looking for a rebound
play, and there has been no shortage of interest in going long on the
housing/consumer recovery this year. While data from home improvement
superstores like Home Depot (NYSE:HD) and Lowe's (NYSE:LOW)
does indeed support the idea that the worst has passed, investors have
been pretty aggressive in bidding up many residential housing plays. Toro (NYSE:TTC) remains a top-notch manufacturing company, but absent a buyout bid, it seems hard to see how cash flow is going to grow fast enough to leave much upside on the table for today's buyers.

When times get tough, investors will hit the bottle. Although sales of
beer and spirits aren't quite as invulnerable to economic conditions as
some investors like to believe, they are a lower-beta product
category. All of that said, and allowing for the good success seen
lately in promoting new internally-developed products and boosting
margins, it's hard to see how Brown-Forman (NYSE:BF.B) keeps its elevated premium for the long haul.

Thursday, December 6, 2012

Small-cap chip company Microsemi (MSCC)
gets a lot of flak for what it is (highly exposed to defense) and what
it isn't (a fast-growing mobile device story), but the fact remains that
this company has grown revenue at a 20% compounded average rate over
the past decade. What's more, the company is offering a rare combo - a
good legacy business where competition faces an uphill battle, coupled
with organic growth opportunities in growth markets and positive margin
leverage.

Change can be painful, and while Oxford Industries' (NYSE:OXM)
move to a more proprietary and aspirational product assortment has
produced solid gains for long-term shareholders, there has been a lot of
volatility along the way (shares went from over $50 in 2007 to below $5
in 2009). Oxford's third quarter is perhaps a microcosm of some of
those challenges - top-tier brands like Tommy Bahama and Lilly Pulitzer
continue to grow well, but the Ben Sherman and legacy Lanier businesses
are struggling and it's taking a lot of money to support the company's
hybrid direct retail/wholesale model.

Back in March, I wrote that investors were only likely to see TIBCO Software (Nasdaq:TIBX)
trade at a discount to fair value "if the company significantly
disappoints the Street." Well, the company did just that on December 4,
announcing a nearly 10% revenue miss and a bigger miss in earnings per share
terms. While TIBCO just bought itself a spell in the penalty box,
risk-tolerant investors may want to take this opportunity to check out
one of the few quality independent middleware companies left on the
market.

Shareholders of copper giant Freeport-McMoRan (NYSE:FCX)
had been waiting a while for the company to "do something," and they
certainly got their wish on Wednesday, though almost certainly not in
the fashion they were expecting. While many analysts and investors had
been looking for Freeport-McMoRan to announce a big move with its
capital, either a sizable buyback/special
dividend or further diversification in mining, almost nobody expected
the big move into energy that the company announced Wednesday morning.

Not
only does the sheer size of the transactions make this a risky move for
Freeport-McMoRan, but so too do the details. In buying Plains Exploration & Production (NYSE:PXP) and McMoRan Exploration (NYSE:MMR),
Freeport is buying two companies that are not exactly non-controversial
assets in their own right. Consequently, this looks like a pretty
high-risk/high-reward transaction for this copper mining giant.

Why any company would want to tie themselves in any way to Pandora's Box
(which contained all the evils of mankind) is beyond me, but there's
more to Pandora (NYSE:P)
than a name. Pandora has quickly established itself as the dominant
Internet radio platform, but many investors have struggled with
reconciling Pandora's market share to its ability to monetize its user
base and (eventually) post solid operating leverage. Although the
post-earnings reaction on December 5 seems overdone, it's not really
surprising given how much of Pandora's value lies in the future and how
sensitive that value is to even small changes today.

Wednesday, December 5, 2012

Mexico's FEMSA (FMX) has already accomplished quite a lot. Not only is Coca-Cola FEMSA (KOF)
the second-largest Coca-Cola bottler in the world and the sole supplier
of brands like Coke and Fanta to the world's second-largest soft drinks
market (Mexico), but FEMSA also operates OXXO, one of the most
profitable and well-run retail operations in Mexico. The stock certainly
has reflected this success, with shares up nearly 50% over the past
year and nearly 200% over the past five years, but shareholders may have
even greater things to look forward to in the coming years.

By and large, the U.S. retail world is not forgiving to companies with failed business plans. And yet, Pep Boys (NYSE:PBY)
continues to stubbornly hang on. Despite a turnaround process that is
going on 15 years now, it's still unclear to me how the company has a
leveragable competitive advantage in the auto parts or service market.
Although improvement to just sub-optimal levels of performance (relative
to industry standards) would likely drive decent gains in the stock,
I'm not sure Pep Boys is a stock for any but the most risk-tolerant
turnaround investors.

Bank earnings are admittedly foggy at the best of times, and it only
gets worse when the size of the bank in question increases. That said, Bank Of Montreal (NYSE:BMO) increasingly looks under pressure when it comes to core growth. With Canada potentially facing a housing crunch of its own
and BMO's assets in the United States still underperforming,
shareholders ought to ask themselves if the discount in BMO's price
really compensates them for the risks.

Tuesday, December 4, 2012

Economic
theorists warn that fiddling too much with tax policy provides
incentives for market participants to devote time and energy to
managing their tax exposure, as opposed to going about the productive
work that generates that taxable
income. The last few weeks have suggested that those theorists
are onto something, as a variety of companies make moves designed to
end-run the upcoming changes in tax policies tied to the fiscal
cliff.

Many companies, including Costco
(Nasdaq:COST),
have announced special
dividends to be paid ahead of the year-end as a means of
transferring more cash to shareholders before taxes on such
distributions increase significantly. Now a host of companies are
making slightly less dramatic, but still significant, changes to the
timing of their dividend payments in order to avoid at least some of
the effects of the fiscal cliff.

Plenty
of investors, analysts and commentators have noted that the airline
business is fundamentally lousy and one of the fastest routes to
losing large amounts of money. There's ample evidence that that is
more than just simple grousing over sour grapes - Warren Buffett's
Berkshire
Hathaway
(NYSE:BRK-A)
has struggled to make any real profits from its various investments
in the sector, and even the well-respected Singapore
Airlines (OTC:SINGF)
has seen its nearly $1 billion investment in Virgin
Atlantic do it
almost no good at all. Now there are stories that SingAir is ready to
cut its losses, and that American air giant Delta
Airlines
(NYSE:DAL)
is eager to pick up the asset.

The
restructuring/repositioning of Dean
Foods (NYSE:DF)
has taken another significant step forward. On Monday before the
open, the country's largest dairy processor announced that it had
reached a long-awaited agreement to sell its Morningstar business.
While Dean Foods got a reasonable price for this asset, it's still an
open question as to whether Dean Foods' overall operating strategy
can reward shareholders.

Investors
with a few gray hairs may remember when DIRECTV
(Nasdaq:DTV)
was a controversial stock, with plenty of doubters as to whether this
company's satellite-based pay TV approach could ever make hay against
likes of Comcast
(Nasdaq:CMCSA).
That debate is long over, and the company has proven that it can
generate pretty significant amounts of cash
flow. That doesn't mean that the stock still doesn't offer some
controversy, though, with the debates now shifted as to whether the
company can withstand the evolving competition of the pay TV market
in the United States and continue to grow in Latin America.

Monday, December 3, 2012

As a BioMimetic Therapeutics (BMTI)
shareholder, I have long regarded a buy-out as the overwhelmingly
logical end game for the company. While I would have initially preferred
to see one of the ortho giants like Johnson & Johnson (JNJ), Stryker (SYK), or Zimmer (ZMH) make the bid, the combination with Wright Medical Group (WMGI) could ultimately prove a lot more powerful for both companies than the Street currently seems to believe.

Saturday, December 1, 2012

It
seems like nothing is ever normal with CMOS image sensor company,
OmniVision Technologies (Nasdaq:OVTI).
Accept that and it can be an intriguingly volatile trading
opportunity. While the stock has often been batted around on rumors,
worries and hopes tied to adoption from key customers like Apple
(Nasdaq:AAPL),
now margins have become another big variable. Consequently, while
very strong revenue guidance for the next quarter really jumps, so to
does the possibility of ongoing margin pressure. Not surprisingly,
that continues to make this a very difficult company to model and a
difficult stock to recommend or own.

A
strange thing has happened in the ongoing development of the Bakken
oil producing region of the United States. While more than a few
writers and analysts have talked about producers in the Bakken region
suffering from too little takeaway capacity, a large pipeline
operator has canceled plans to build a pipeline that would have
carried crude from the Bakken region down to the Cushing, Oklahoma
hub.

No
Thanks, We're Fine

ONEOK
Partners
(NYSE:OKS)
had planned to build the Bakken Crude Express Pipeline to connect
multiple points in the Williston Basin (part of the Bakken formation)
in Montana and North
Dakota, a top oil producing state, to Cushing. The pipeline would
have been about 1,300 miles long, carried about 200,000 barrels per
day and covered much of the same territory as the Bakken NGL Pipeline
project that is underway at a cost of around $1.7 billion.

For
those who think supermarket operators can't produce worthwhile
capital gains, Kroger's
(NYSE:KR)
roughly 18% move up over the past three months is a good
counter-argument. What's more, while food retailing continues to be a
tough business, made even more difficult by price competition from
entities like Walmart
(NYSE:WMT)
and dollar stores and economic pressures on shoppers, Kroger
continues to execute at a high level. Although this stock still does
not look all that cheap on a cash flow basis, investors should never
be quick to abandon well-run companies.

When
you're a public company, investors' appetite for growth has to be
taken into account when it comes to business strategy. I suspect this
is part of the reason so many publicly-traded luxury brands have
spent the last two decades targeting that "mass affluent"
market. While that approach has generally earned these companies
quite a lot of money on balance, it may have been part of what
tripped up Tiffany
(NYSE:TIF)
this quarter. Even with the disappointment, though, this is still not
what you'd call a cheap stock.

As
a semiconductor stock with strong ties to the smartphone/tablet
market, Avago
(Nasdaq:AVGO)
has been a part of that favored group of chip stocks ((which includes
Qualcomm
(Nasdaq:QCOM)
and Skyworks
(Nasdaq:SWKS))
that has generally outperformed its peers. Not only did Avago deliver
growth in a tough quarter, but smartphone wins could make 2013 a
strong year as well. Betting on better conditions for chip stocks has
been a losing bet for most of 2012, but Avago remains a name worth
knowing for more risk-tolerant investors.

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I started this blog as a way of archiving my writing for sites like Investopedia, as well as posting some thoughts on the markets, stocks, or whatever else strikes my fancy.
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You can reach me at tuonela (dot) fool (at) gmail (dot) com

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Information is taken from sources believed to be reliable but no warranty or guarantee is made with respect to accuracy.

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